{"id":905410,"date":"2026-03-03T15:58:12","date_gmt":"2026-03-03T22:58:12","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=905410"},"modified":"2026-03-03T15:58:15","modified_gmt":"2026-03-03T22:58:15","slug":"borrowed-servant-rule-liability-risks","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/borrowed-servant-rule-liability-risks\/","title":{"rendered":"The Borrowed Servant Rule: Liability Risks for Contractors and Owners"},"content":{"rendered":"\n<p>Casey Few and Jeffrey Nix | <a href=\"https:\/\/www.clarkhill.com\/news-events\/news\/the-borrowed-servant-rule-liability-risks-for-contractors-and-owners\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Clark Hill<\/a><\/p>\n\n\n\n<p>Contractors \u2013 of all tiers \u2013 are often surprised to learn they may be considered a \u201c<em>special employer<\/em>\u201d of individuals who actually work for independent third parties\u2014such as temporary staffing agencies or equipment rental companies\u2014on their projects. Even more surprising, contractors (including owners who self-perform) can be held primarily responsible for the negligent acts or omissions of these third-party workers because of this \u201c<em>special employer<\/em>\u201d status. How can a contractor become primarily liable for someone they do not pay, do not withhold taxes for, do not provide benefits to, and who is officially employed by another company?<\/p>\n\n\n\n<p>The answer lies in an old legal concept called the \u201c<em>Borrowed Servant Rule<\/em>.\u201d Under this rule, a contractor can become a \u201c<em>special employer<\/em>\u201d of so-called \u201c<em>borrowed<\/em>&nbsp;servants\u201d\u2014workers who remain employed by a third-party company but are temporarily assigned to the contractor for a specific job. The rule, based on outdated master-servant principles, focuses on who actually controls the worker. Variations of this rule exist in nearly every state, creating significant risks for contractors nationwide.<\/p>\n\n\n\n<p>For example, imagine a contractor rents a crane or backhoe, and the rental company provides the operator. Under the Borrowed Servant Rule, the contractor typically becomes the \u201c<em>special employer<\/em>,\u201d the operator is the \u201c<em>borrowed servant<\/em>,\u201d and the rental company is the \u201c<em>general employer<\/em>.\u201d If a court finds the contractor to be the \u201c<em>special employer<\/em>,\u201d the contractor can be held liable for personal injury or property damage caused by the operator\u2019s negligence\u2014including injuries to the operator or damage to the rented equipment.<\/p>\n\n\n\n<p>There are two main tests used to determine whether a contractor is a \u201c<em>special employer<\/em>,\u201d both centered on the issue of control. The first test looks at whether the contractor has a contractual right to control the work and how it is performed. This right is often hidden in standard contract language found on rental agreements, service contracts, daily tickets, acknowledgments, or similar documents. Contractors may not realize that by signing these documents, they are granted an express contractual right of control \u2014even if the term \u201cborrowed servant\u201d is never mentioned and they never actually exercise control.<\/p>\n\n\n\n<p>The second test considers whether the contractor actually exercises direct control over the \u201c<em>borrowed servant<\/em>\u201d\u2014for example, by directing where, when, and how the work is done. No written contract is needed for this test; the contractor\u2019s actions alone can establish \u201c<em>special employer<\/em>\u201d status. In many cases, contractors become \u201c<em>special employers<\/em>\u201d under both tests when they have both a contractual right of control and actually exercise that control.<\/p>\n\n\n\n<p>Most of the risks and liabilities created by the&nbsp;<em>Borrowed Servant Rule<\/em>&nbsp;arise in situations involving temporary labor or equipment rentals, where contractors often control, to some degree, employees of a third party. Standard forms used by staffing agencies and equipment rental companies usually recognize this practice and almost always give the contractor the right to control the work performed by the \u201c<em>borrowed servant<\/em>.\u201d However, these forms rarely indemnify the contractor for the worker\u2019s negligence or name the contractor as an additional insured on the employer\u2019s general liability (GL) policy.<\/p>\n\n\n\n<p>Because most contractors are unaware of this rule, they often fail to modify standard forms and assume the general employer\u2019s insurance will protect them. However, as soon as the \u201c<em>borrowed servant<\/em>\u201d starts work on the project, the contractor becomes their \u201c<em>special employer<\/em>\u201d and is primarily responsible for any negligent acts or omissions, often with little or no recourse against the staffing agency or rental company that supplied the worker.<\/p>\n\n\n\n<p>Many contractors first learn about the&nbsp;<em>Borrowed Servant Rule<\/em>&nbsp;only after suffering a loss caused by a \u201c<em>borrowed servant<\/em>\u201d\u2014and discovering they are responsible for the entire insurance deductible, or worse, the entire loss if there is no coverage. At the same time, they often find that the workers\u2019 compensation and general liability policies provided by staffing agencies or equipment rental companies rarely, if ever, cover personal injury or property damage involving \u201c<em>borrowed servants<\/em>.\u201d<\/p>\n\n\n\n<p>Unless the standard forms used by the \u201c<em>general employer<\/em>\u201d are modified, the contractor remains exposed to claims and losses caused by the \u201c<em>borrowed servant<\/em>.\u201d Personal injury claims made by the \u201c<em>borrowed servant<\/em>\u201d are submitted to the contractor\u2019s workers\u2019 compensation policy, which can impact their safety rating and increase premiums. Third-party claims for personal injury or property damage are submitted to the contractor\u2019s GL policy, subject to deductibles and potential premium increases. Most costly of all, property damage to the work itself (including schedule impacts) is often absorbed by the contractor due to insurance coverage exclusions. Learning about the rule the hard way can be extremely expensive!<\/p>\n\n\n\n<p>Contractors who have experienced the negative effects of the<em>&nbsp;Borrowed Servant Rule<\/em>&nbsp;can take steps to reduce or eliminate these risks through insurance and indemnification strategies. First, they can require the \u201c<em>general employer<\/em>\u201d (such as a staffing agency or rental company) to obtain an \u201c<em>alternate employer endorsement<\/em>\u201d that extends workers\u2019 compensation coverage to the \u201cspecial employer.\u201d Second, they can require the \u201c<em>general employer<\/em>\u201d to indemnify the \u201c<em>special employer<\/em>\u201d for losses, damages, and claims arising from the \u201c<em>borrowed servant<\/em>\u2019s\u201d negligence. Third, they can require the \u201c<em>general employer<\/em>\u201d to name the \u201c<em>special employer<\/em>\u201d as an additional insured under the&nbsp;<em>general employer\u2019s<\/em>&nbsp;GL policy. Finally, successful contractors stay informed about developments in the&nbsp;<em>Borrowed Servant Rule<\/em>&nbsp;in every state where they operate.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Casey Few and Jeffrey Nix | Clark Hill Contractors \u2013 of all tiers \u2013 are often surprised to learn they may be considered a \u201cspecial employer\u201d of individuals who actually work for independent third parties\u2014such as temporary staffing agencies or equipment rental companies\u2014on their projects. Even more surprising, contractors (including owners who self-perform) can be&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/borrowed-servant-rule-liability-risks\/\">Continue reading <span class=\"screen-reader-text\">The Borrowed Servant Rule: Liability Risks for Contractors and Owners<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14],"tags":[9895,12298,12],"class_list":["post-905410","post","type-post","status-publish","format-standard","hentry","category-construction-2","tag-advise-consult","tag-borrowed-servant-rule","tag-construction","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Borrowed Servant Rule: Liability Risks for Contractors and Owners - Advise &amp; 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